Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A, BRK.B) reported net stock sales of $1.5 billion in the first quarter, marking a significant shift as the firm generally operates as a net buyer. Sales totaled $4.6 billion while purchases were only $3.1 billion, raising concerns about market opportunities amid elevated valuations. Berkshire held a record $348 billion in cash and equivalents during this period.
Historically, the S&P 500 has underperformed following quarters where Berkshire was a net seller, returning an average of 12% compared to 18% after net buying quarters over the past seven years. The S&P 500 closed at 5,612 on March 31 and is projected to reach 6,285 in the next 12 months if it follows historical averages, implying only 3% upside from its current level of 6,092.
Challenges include the Trump administration’s trade policies and elevated market valuations, with the S&P 500 trading at 22 times forward earnings, above the 10-year average of 18 times. Despite these concerns, Buffett emphasizes focusing on high-conviction stocks when opportunities arise.
